Wine DTC shipments rebound in June (VWE)
In the first six months of 2021, winery DTC shipments grew 12% in value to $1.89B. Total volume grew 1.9% to 4.1 million 9L cases. Shipment volumes have been down in the months since anniversarying the pandemic in March before growing once again in June. As a result, June DTC volumes grew 4%, while average bottle prices grew 13%. In June, the average bottle price was $32.38, while the average bottle price in the first half of 2021 was $38.50, which was up 10.1% YOY. The average bottle price decreased in the first half of 2020 by 11% due to the robust volume growth during the onset of the pandemic.
In the first half of 2021, the largest wineries (above 500,000 cases produced annually) had the largest volume growth at 9.7% and value growth of 10.9%. Medium-sized wineries (between 50,000 and 499,000 cases annually) had a volume decrease of 14.9%, and the value was flat. Wineries between 5,000 and 49,999 cases of production increased by 5.6%. The smallest wineries below 5,000 cases had a 4.1% decrease in volume. DTC is about a third of Vintage Wine Estates' sales mix.
Inflationary pressures in fresh produce (FDP)
Fresh Del Monte reported a 5% YOY sales increase in Q2, improving from -3% sequentially. The fresh and value-added products segment had a 6% sales increase. The bananas segment had a 0.7% sales decrease. Gross margins expanded 160bps to 9.6% in Q2; half of the improvement was Fx-related. EPS was $.98 compared to $.54 in the prior year.
Fresh Del Monte is “…facing unprecedented disruptions in global supply chains and shortages of labor, resulting in significant cost increases. As a result, we experienced inflation in labor, fuel, inland freight, packaging, production, and procurement costs during the second quarter. We anticipate these inflationary pressures will remain for the near term and have taken proactive measures to counter the impacts on our results, including a comprehensive review of our pricing strategy….” Banana supplies have recovered from a hurricane, avocado prices continue to be lower, and pineapple demand and prices were improved from last year.
The newly merged Dole and Total Produce (DOLE) will seek to use its scale advantages to offset the inflationary pressures in the sector while attempting to raise prices. However, if pricing is difficult for the giants in the industry, it would seem to be more challenging for the vertical grow startups (APPH and SV) to offset inflationary pressures.
Lab-grown milk (OTLY)
A number of startups from Silicon Valley to Singapore are competing to create the first imitation cow’s milk. Scientists are trying to artificially reproduce the proteins in curds and whey to recreate dairy milk’s authentic mouthfeel, temperature resistance, and texture for cheese. Precision fermentation has been around for decades, but it was typically used to manufacture enzymes for detergents or insulin. Now the technology is also being used for food protein production. The only company so far to have brought protein fermentation-based products to market is Perfect Day. The company developed the first whey protein from cow’s milk. According to Perfect Day’s CEO, the milk proteins whey and casein “are perfectly structured to deliver dairy’s unique taste and texture. It’s ideal for providing a rich, creamy, smooth, and indulgent eating experience and excels in product applications requiring solubility, gelation, water-binding, foaming, heat stability, and emulsification.” New Culture, a startup, is currently focused on developing mozzarella cheese that melts perfectly for pizza using fermented protein-based milk.
It seemed inevitable with the number of plant-based and lab-grown food alternatives that dairy milk made in a lab would be pursued. The TAM, market position vs. plant-based milk, and prohibitive costs bring up the question it should be done rather than can it be done.
